cei planet - july-august 2013

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COMPETITIVE ENTERPRISE INSTITUTE VOLUME 26, NUMBER 4 JULY/AUGUST 2013

FEATURED ARTICLES

ALSO INSIDE:

Spreading the Narrative of FreedombyLawson Bader. . . . . . . . . . . . . . . . . . .

Ethics and Liberty: Engines of EconomicGrowthby Deirdre N. McCloskey. . . . .

The Good, the Bad, and the Ugly . . . .

Media Mentions . . . . . . . . . . . . . . . . .

End Notes . . . . . . . . . . . . . . . . . . . . . .

YEATMAN & WYNN:EPA GROWTHKNOWS NO LIMITS

>>page 6>>page 5

BY SEN. RAND PAUL

It is kind of hard being in the

opposition party because you have

got to be agile. You have got to shift

from one scandal to the other. It is

sort of like the Old MacDonald Farm

of Scandals: here a scandal, there a

scandal, everywhere a scandal. And

I am starting to think that the Obama

administrations public relations ploy

is to displace one scandal with the

other.

But really, if you say, What

is the nexus, what intertwines all

of these scandals? It is really agovernment that is drunk on power.

It is a government that has allowed

so much power to gravitate to the

presidency, and as an extension, to the

bureaucracy.

When I ran for ofce, I thought I

will get to be a senator and I will have

an important role in deciding the laws

of the nation. But it turns out the laws

are not written by your legislature.

The laws are written by the regulatory

bureaucracy.

Obamacare was bad enough at

2,000 pages, but the regulations are

20,000pages. Dodd-Frank is anothecouple thousand pages, but the

regulations have not been nished an

they will be over ve, six, maybe eig

thousand pages. The problem is we

have let government get away from

I know there have been some

complaints about Obamacare, but yo

government just wants to take care o

you. They think you are too stupid t

take care of yourself.

Really what we have here, if you

are concerned about regulations, is t

same problem we have with foreignpolicy or war or anything else: Too

much power has gravitated away fro

you, away from your representatives

and to the president.

The one thing I did not understan

when I came here, though, was

I thought laws had to change to

make a difference. The one thing

that is absolutely true is that we

did not change a lot of laws on the

environment. We did not change a lo

(continued on page

Broadening the Message ofFreedom Is the Path to Victory

BERLAU & TASSINARI: INPRAISE OF BANKING ATBIG BOX STORES

MELCHIORRE: BEWARETHE MYTH OF EUROPEAN

AUSTERITY

>>page 4

Senator Rand Paul (R-Ky.) delivers the keynoteaddress at the 2013 CEI Annual Dinner


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CEI THECOMPETITIVEENTERPRISEINSTITUTE

CEIPLAN

PublisheLawson Ba

Founder

Fred L. Smit

EditorMarc Scrib

Editorial DireIvan Oso

Contributing Nicole Cian

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interest grodedicated toenterprise a

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CEI is a nopartisan, n

profit organizincorporated District of Coland is classifithe IRS as a 5

(3) charity. CEupon contribufrom foundacorporationsindividuals fsupport. Artmay be reprprovided theattributed to

Phone:(202) 331-1

Fax:(202) 331-0

E-mail:[email protected]

ISSN#: 1086-3

>>MESSAGE FROM THE PRESIDENT

Spreading the Narrativeof FreedomBy Lawson Bader

Last year CEI began to search for a successor toFred Smith. Last fall I was fortunate enough to beselected, and I am honored to be working closely with

him to ensure the success of this changeover.

After six months on the job, I am happy to report

nothing! This presidential transition has been devoid of

guns, knives, killer drones, or the wiretapping of Fredsphone.

And while Fred is convinced that Ive secretly

installed a trap door underneath his desk, the truth is

he deserves a great deal of credit for doing what too

many D.C. leaders fail to do: voluntarily hand over to a

successor.

Although, as Fred has

said before: It was only

after reading King Lear that

I realized that I needed to do

this transition right!

But I would not be here

if I thought CEI was ill-prepared or unwilling to

engage in this important ght.

CEI truly is more

than just a think tank. We

combine rigorous policy work

with persistent advocacy. We dont just think but also

project our ndings and principles deep into the policy

arena and out into the wider world.

We are bright and creative individuals who love

analyzing and writing. Okay, so were wonks. But

weregoodwonks. Better yet, good activistwonks.

We relish engaging and harassing and shaming and

suing. We build coalitions, le FOIA requests, and

without any thought to our personal safety or image,

we broadcast our message far and near. We are a blend

of the Ivory Tower and the Island of Mist Toys.

CEI is sorely needed today. These are frustrating

times for those of us who believe in free enterprise.

In the midst of one of the worst economic crises

in modern history, President Obama and his allies

continue to argue that Washington, D.C. is a better

steward of Americans life and liberty than are

Americans themselves. And, unfortunately, that

argument has prevailed.

Our job now is to channel dismay over these

abuses into red-hot anger at the real monster along the

Potomac: namely the overgrown and ever-expanding

federal administrative state. In our recent publication,

10,000 Commandments, we estimate its total cost atover $1.8 trillion, much of it borne by families and

small businesses.

We know what to expect for the next three years.

In the 1980s, Ronald Reagan said Its morning in

America. Under President Obama, its midnight

or rather, its a perpetual

midnight regulationas he has

signaled in his willingness to

bypass a gridlocked Congress

and use the regulatory

process to cement his vision

of a pervasive nanny state.

Each of us needs tochallenge this. Whether

an individual contributor,

business supporter, or think

tank ally, each of us must

intervene or this trend will

continue and we will nd ourselves so far down the

path of paternalism and restricted liberty that any

glance back will only be an act of nostalgia.

Thomas Jefferson said that, If we can prevent the

government from wasting the labors of the people,

under the pretense of taking care of them, they must

become happy.

CEI does what Jefferson hoped forwe thwart the

waste of peoples labors and in doing so, we uphold

the freedom to prosper, aspiring to a future of longer

lives and cleaner air instead of major disease. A future

of sunset walks with loved ones instead of holding

down two jobs to pay their taxes. That is a pretty good

narrative. And it is ournarrative.

In the 1980s, RonaldReagan said Its morning in

America. Under President

Obama, its midnightor rather, its a perpetual

midnight regulation.

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of laws on how your businesses deal with

the environment. But things changed

dramatically simply by executive at, by

regulatory change, by regulatory law. So itdoes make a difference whois in charge of

the EPA.

There is a question whether you can get

a fair shake from a government employee.

Is it a rogue government employee that

went after the Tea Party or went after

people for religious reasons or

went after Gibson Guitar?

Remember the case of Gibson

Guitar? It turns out Fender Guitar

brings in the same kind of wood,

but they give to Democrats and

Gibson gave to Republicans.

Guess who got prosecuted? It

turns out they really were not

prosecuted for anything that had

to do with whether or not the

wood was endangered or not.

They wanted the wood to be

processed by labor in India. It was simply a

labor protection racket for India.

But the most insulting thing about the

Lacey Act, if you have not heard of it, is

that it is making U.S. businesses subject

to foreign laws and foreign regulations.We put an American citizen in jail for 10

years for bringing in some crabs from the

Gulf of Mexico off the coast of Honduras

and they said he broke a Honduran shing

regulation. He brought them in in Ziploc

baggies instead of cardboard. And that

earned him 10 years in prison.

We have a man down in the southern

part of Mississippi. He is in jail for 10

years. His partner is 80 and he has got a

10-year sentence. Their crime? Putting

clean dirt on dry land. He is accused of a

wetlands violation. But to give him moretime, they said he was a conspirator. He

was the Al Capone of putting clean dirt on

dry land. They included his daughter. She

is a nurse and sold lots part time for his

real estate company. She got 84 months in

prison without parole. She has a two-year-

old child. She never had a trafc ticket.

Your government has run amok whenyoure putting people in jail for regulatory

crimes and it has got to end.

It is not going to be enough for me or

anyone else to convince the business class.

The business class, God love you, you are

entrepreneurs and you are the backbone

of the country. But there are not enough

of you. There will always be more of the

working class. We need a message that

resonates with everybody. We have to have

a message of opportunity that resonates

with those who work for you, which says

that their chance to get into the middleclass or their childrens chances to become

one of you exists for them.

It has to resonate to even those who are

on unemployment insurance, those who

are in need and not doing well. I have had

family members who are down on their

luck and have taken government assistance.

We have to convey the message you are

not a bad person because you have taken

government assistance. We need to give

them a message of hope that they can join

the rest of us in the middle class and the

successful class and the business class.

We need to have this optimism. It needs

to appeal to people of all races. When

we look like Americawhen we have

people with tattoos, without tattoos; with

ponytails, without ponytailswhen we

look like the rest of America, we will be a

national party again.We need to attract African Americans t

our movement. I think ideas of justice wil

do that. African Americans can remember

a time when there was no justice for them

when things were incredibly unfair, when

the law was unfair and the law was biased

When we talk about issues like

indenite detention, which is

supposed to be for terrorists but

could be applied to American

citizens, that appeals to that

sense of justice.

When we talk about our

drug laws that are imprisoning

African Americans at four

to six times the rate of white

Americans. When we give

government grants to police

departments and say, Base it on

your arrest record, it does not take them

long to gure out they can arrest more kid

in the poor neighborhood than they can in

the rich neighborhoodand they can get

convictions because the poor kids do not

have attorneys and do not have any moneyWhen we talk about these ideas and

issues of justice, we will get more people

coming to us. When we talk about the idea

of privacy. You want your business to be

left alone. Young adults do not have any

money, but they want their Internet to be

left alone. They want their email to be left

alone. Its all the same thing. When we can

bundle all that up in a message of freedom

we will win again.

Sen. Rand Paul (R-Ky.) delivered

the keynote address at the 2013 CEIAnnual Dinner and Gala on June 20 in

Washington, D.C. This article is adapted

from those remarks.

Message, continued from page 1

Te business class, God love you, youare entrepreneurs and you are the

backbone of the country. But there arenot enough of you. Tere will always

be more of the working class.


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C THECOMPETITIVEENTERPRISEINSTITUTE

BY JOHN BERLAU AND KYLE TASSINARI

Heres some good nancial news formillions of Americans: The provisionin Dodd-Frank that imposed a three-year

moratorium on banks afliated with

nonnancial businesses expired on July 22.

Now, if Congress simply does nothing and

regulators apply the law fairly, Walmartcould begin offering affordable credit,

savings accounts, and CDs to consumers.

So could Home Depot and Berkshire

Hathaway, both of which applied for a

charter to offer banking services before

Dodd-Frank took effect.

Opponentsincluding established

banks big and smallwill no doubt scream

about the risks of allowing nonnancial

rms to enter the banking world. In the

mid-2000s, Federal Reserve Chairman

Ben Bernanke and his predecessor

Alan Greenspan might have brushed off

concerns about subprime mortgages, but

they warned about the supposed dangers of

breaching the separation of banking and

commerce. Yet most other countries have

no such separation.

When Dodd-Frank was enacted in 2010,

the United States joined just three other

countriesthe economic powerhouses of

Fiji, Guernsey, and the Isle of Manas the

only jurisdictions prohibiting new charters

for banking afliates of commercial rms,

according to a 2011 Milken Institute study.Yet successful banks owned by

nonnancial rms exist all over the

world. While Walmart was barred from

nancial services in America, it operated

a full-service bank in Mexico and a bank

that issues credit cards in Canada. The

Loblaws supermarket chain has a banking

unit, Presidents Choice Financial, which

earned J.D. Power and Associates highest

customer satisfaction rating from 2007 to

2011 among Canadian midsize banks.

Perhaps the most successful example

of a bank afliated with a commercial

enterprise is the banking division of

Tesco, the British grocery and general

merchandise retail chain. In 1997, Tesco

entered a joint venture with Royal Bank

of Scotland to create Tesco Personal

Finance. In 2008, when RBS was hit hard

by the nancial crisis, Tesco bought out its

partners stake and became sole owner of

the renamed Tesco Bank.

Tesco Bank currently has more than

5.57 billion ($8.6 billion) in outstanding

mortgages, personal loans and credit card

debt to British residents. In addition, 12.5

percent of credit card transactions in the

United Kingdom are charged on Tesco

cards and one pound out of every eight

withdrawn from a cash machine comes

from a Tesco ATM, according to The

Daily Telegraph. Tesco Bank also offersinsurance to more than 1.5 million home

and auto policy holders.

In 2009, Alistair Darling, then

chancellor for the exchequer in Gordon

Browns Labour Government, praised

Tescos initiatives and made the case

for new types of banks. We need more

competition in the banking sector, Darling

said. It is therefore very important that we

do everything we can to encourage new

entrants into this sector.

More banking competition serves

another important interest. In order forlarge rms to fail in any industry without

signicant disruption elsewhere, there

must be new and competing rms ready to

supply the product or service.

By the time Borders and Blockbuster

went bust, Amazon and Netix had grown

large enough to sell books and DVDs to a

large national customer base. By contrast,

if a megabank fails, there is a very real

possibility that the supply of credit and

nancial services will be constrained. That

concern

can be

eased greatly

if large commercial

businesses could create banking units.

Internationally and in the U.S.where

about 15 such grandfathered banks exist

the safety and soundness of banks owned

by commercial rms exceeds that of the

banking sector as a whole. According to

the Milken Institute, U.S. industrial loan

companies, the most common classicatio

for such banking entities, in the aggregathave a signicantly higher ratio of capital

to assets (16.7 percent) than the banking

industry as a whole (11.3 percent).

Industrial loan companies owned by

nonnancial rms also have the lowest

percentage of troubled assets of all banks

(2.35 percent).

The banking subsidiaries of Target,

Harley-Davidson, and Toyota are example

of such companies that have been in

existence for decades and extend credit

mostly to their own customers. For safety,

convenience, and price, the U.S. needs

to join the rest of the world and allow

nonnancial companies to own and operat

banks.

John Berlau ([email protected])is a Senior

Fellow at CEIs Center for Economic

Freedom. Kyle Tassinari (ktassinari@cei.

org)is a Research Fellow at CEI. A versio

of this article originally appeared in The

Wall Street Journal.

InPraiseofBanking

atBig-BoxStores


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BY MATTHEW MELCHIORRE

Frances Austerity Drive Pushes Countryinto Recession. How Austerity HasFailed. Thus proclaim two recent, typical

headlines on how European governments

are trying to tackle the economic crisis. But

such claims rely on two myths based onfaulty analysis.

The rst myth about austerity is that it

has been enacted throughout Europe. The

second is that it has led to economic ruin.

Americans ought to be wary of politicians

and pundits who hold up the pains of

Europe to argue against scal responsibility

at home.

Several studies have attempted to show

that European countries have made real

cuts to their public sectors, using spending

and revenue data. But cuts since when?

Analyses to date have relied on selection ofa base yearusually 2007 or 2008from

which to measure changes in government

spending and revenue.

The problem is that not every European

country began implementing austerity at

the same time. Therefore, analyzing all

European countries from the same starting

date captures budget changes in some

countries that occurred before austerity

programs began.

In a recent Competitive Enterprise

Institute report, The True Story of

European Austerity: Cutting Taxes and

Spending Leads to Renewed Growth, I

address this common analytical aw by

measuring spending and revenue changes

from the time each country began its

austerity program. The results stand in stark

contrast to the conventional wisdom.

Only four European countries

Bulgaria, Ireland, Latvia, and Lithuania

have actually decreased both spending

and revenue as a share of GDP since

announcing the implementation of their

respective austerity programs. This is real

austerity, as cutbacks are shared between

the public and private sectors.

Meanwhile, nine countries pursued

the exact opposite policy, increasing both

spending and their tax burdens. This is

no austerity in any reasonable sense ofthe term, as businesses and individuals

already hemorrhaging from the recession

face increased taxation from a government

engorging itself at their expense.

The economic results of these two

groups of countries are very different.

The rst group, which carried out real

austerity, maintained an average annual

GDP growth rate of 2.65 percent in the

six years following budget consolidation,

according to my calculations using Eurostat

and International Monetary Fund data. The

second group, the austerians-in-name-

only, achieved an average growth rate of

only 1.46 percent.

Moreover, various European countries

enacted different combinations of spending

and tax burden changes. The only group

that achieved an average growth rate

of more than 2 percentthe standard

for healthy economic growthis the

aforementioned one whose members cut

both taxes and expenditures.

The bottom line: Shrinking

governments economic footprint leavesbusinesses and entrepreneurs less

encumbered to create wealth.

With U.S. federal expenditures and

taxes set to increase over the next several

years, according to the presidents budget,

American policy makers should learn from

Europes experience. The U.S. doesnt

have an unlimited amount of time to x its

economic problems, as the share of federal

revenues taken up by interest payments on

the federal debt now approximates those

Italy and Spain.

Washington continues to increase our

debt load through increasing levels of

federal outlays and encouraging private

debt-fueled consumption with low interes

rates. These debt-driving policies are the

only ones to have had a net positive impaon GDP since 2007, according to my

analysis of Bureau of Economic Analysis

data.

By contrast, gross domestic investmen

has endured a total net loss of 11 percent

from its 2007 level. As debt-nanced

consumption papers over our anemic

economic situation, politicians claim

that conditions are improving. Its time

for Washington to end this charade and

make real cuts. Greater savings would

then nance productive investment and

government would be eating up fewer

economic resources.

The howls of protest from both the lef

and right over the sequesterwhich cuts

a mere 2 percent from a projected $2.54

trillion federal spending increase over the

next decade, according to Veronique de

Rugy of the Mercatus Center at George

Mason Universityonly shows how far w

still need to go.

In his 2013 State of the Union address

President Barack Obama declared, We

cant just cut our way to prosperity.Perhaps he should pay closer attention to

the success of a handful of our European

friends, as they shout back a familiar

refrain: Yes, we can!

Matthew Melchiorre (mmelchiorre@cei.

org)is the Warren T. Brookes Journalism

Fellow at CEI. A version of this article

originally appeared in U.S. News and

World Report.

Beware the Myth of

European Austerity

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EPA Growth Knows No LimitsEPA Growth Knows No LimitsBY WILLIAM YEATMAN AND TODD WYNN

In mid-July, President Obama rolled outa climate plan t for a king. In a speechat Georgetown University, the president

declared that since Congress wont enact

climate policies, he will just impose

themmuch as a king would.

Simply put, the president is using

congressional inaction as a pretext to launch

a climate policy power grab, and that is

very troubling. Alas, it is only the latest

development in a worrying accumulation

of authority at the U.S. Environmental

Protection Agency. A new American

Legislative Exchange Council report, The

U.S. Environmental Protection Agencys

Assault on State Sovereignty, reveals

that the agency has been systematically

centralizing environmental protection by

seizing rightful control from the states and

replacing local community input with

extremist environmental activists.

Under both the Clean Air Act and Clean

Water Act, the EPA has the authority to

disapprove a states strategy to meet

national environmental standards. A

regulatory disapproval is no small matter,

as state ofcials spend countless hours and

taxpayer resources crafting plans to comply

with newly nalized EPA regulations.

When the EPA issues a regulatory

disapproval, the agency effectively throws

all of this work out the window.

Since President Obama took ofce,the number of regulatory disapprovals

has skyrocketed. The EPA issued 44

disapprovals during President Clintons

second term, 42 during President George

W. Bushs rst term, and 12 during Bushs

second term. During President Obamas

rst term, the EPA issued an unprecedented

95 disapprovalsa greater than 190

percent increase from the average number

of disapprovals during the previous three

four-year presidential terms.

Even more alarming is the increasing

number of EPA takeovers of stateregulatory programs. The EPAs most

aggressive action is known as a federal

implementation plan (FIP), which

entails complete federal usurpation of a

states regulatory authority. From 1997

through 2009, the EPA imposed only

two FIPs. Since Obamas rst

inauguration in 2009, the

agency has imposed 19 FIPsa

2,750 percent increase from

the average number during each

of the previous three four-year

presidential terms.These two trends illustrate a

frightening picture of the growth of

the EPAs authority during Obamas

tenure in ofce. Centralizing environmental

protection essentially imposes on states

a one-size-ts-all approach that

does not take into account each

states unique circumstances and

the effect their residents.

Just as scary, the EPA is

replacing the input of American citizens

and state regulatory ofcials with that of

environmental activist groups through

what are known as sue and settle

agreements. Heres how it works: An

environmental litigation organization like

the Sierra Club sues the EPA for failing

to meet a deadline for regulatory action.

Instead of challenging the suit, the agency

and the plaintiffs immediately enter into

a friendly settlement that determines a

deadline. By dictating how the EPA should

roll out environmental regulations, these

settlements effectively render ofcial

policy without any input from electedofcials at both the federal and state level

The three presidential terms prior

to President Obama saw a total of 30

sue and settle agreements, compared to

48 during Obamas rst terma 380

percent increase over the annual average

during the previous three four-year

presidential terms. These agreements

embody regulation without representation

They are emblematic of a rogue federal

agency with little accountability (which

should be unsurprising, given the Obama

administrations recent IRS, JusticeDepartment, and National Security Agenc

scandals).

This federal power grab could have

severe consequences. Individual liberties,

political speech, and privacy are all at

stake. The EPAs regulatory assault would

impose billionsperhaps even trillions

in direct costs, as well as undermine

states rightful authority in environmental

regulation and policy making. It is all

part of the Obama administrations

established pattern of shifting rights away

from individuals and states to unelectedregulators and unaccountable bureaucrats

in Washington, D.C.

William Yeatman ([email protected])

is Assistant Director of CEIs Center for

Energy and Environment. Todd Wynn is

Director of the Energy, Environment, and

Agriculture Task Force at the American

Legislative Exchange Council. A version

of this article originally appeared in The

American Spectator.



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BY DEIRDRE N. MCCLOSKEY

Ive been an economist and historian,English professor, and philosopher for along time. I have been so thrilled to nd in

my older years a project that inames me,

that excites metrying to answer what I

regard as the main question of the social

sciences, which is, Why are we so rich?

I look around this room and I dont see

any descendants of the crowned heads of

Europe or Africa or Asia. Maybe there aresome, but there are not too many. Most

of us are descended from very, very poor

people. And here we are at the CEI Dinner.

What has astonished me is the answer

I have discovered. Now, the problem is, I

am a little worried because I am delighted

at the answerbecause the answer is that

we are rich because we are free. And were

rich because we honor each other, because

we value each other.

It turns out that the bulkI think the

overwhelming bulkof the historical

and economic evidence is that the engine

of economic growth is not investment or

exploitation or empire or even the current

fashion at the World Bank of institutions

it is ethics. It is believing in ourselves and

honoring ethical behavior in each other,

and having what I call in my books dignity

and liberty.

Its a special pleasure to get this

marvelous award from an institution that

believes above all in human dignity and

liberty.

Thank you very much.

Deirdre N. McCloskey, the Distinguished

Professor of Economics, History, English,

and Communication at the University of

Illinois at Chicago, is CEIs 2013 Julian L.

Simon Memorial Awardee. This article was

adapted from remarks she delivered at the

2013 CEI Annual Dinner and Gala on June

20 in Washington, D.C.

Ethics and Liberty:Engines of Economic Growth

About the

Julian L. Simon

Memorial Award

In 2001, CEI establishedan award in honor of the

late free market economist,

Julian L. Simon, whose classic1981 work, The UltimateResource, debunks the

alarmist predictions of eco-doomsayers like Paul Ehrlich.In 1980, Simon and Ehrlich

famously entered into a wagerregarding resource scarcity.They selected fve metalscopper, chromium, nickel,

tin, and tungstenwith Simonbetting their prices would

decrease over a decade andEhrlich betting they wouldincrease. Ehrlich lost the bet.

The award is traditionallypresented at CEIs annualdinner. Stephen Moore, amember of The Wall StreetJournals editorial boardand former research fellowwith Dr. Simon, was the frst

recipient of the Julian L. SimonMemorial Award.

CEI President Lawson Bader (left) and CEI Founder and Chairman Fred Smithpresent the Julian L. Simon Memorial Award to Deirdre McCloskey, Distin-guished Professor of Economics, History, English, and Communication at the

University of Illinois at Chicago


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The Competitive Enterprise Institute held itsAnnual Dinner and Gala blocks from theWhite House in Washington D.C., on June 20,

2013. This years theme was James Bond. The

nights featured keynote speaker was Sen. Rand

Paul (R-Ky.)

Elected in 2010, Sen. Paul has proven to

be an outspoken champion for constitutional

liberties and scal responsibility and a

warrior against government overreach. His

legislative proposals include plans to cut $500

billion in federal spending and to balance the

federal budget in just ve years. He has sinceintroduced similar bills with growing support. In

2013, Timemagazine named Sen. Paul as one of

the 100 most inuential people in the world.

Deirdre N. McCloskey, the Distinguished

Professor of Economics, History, English, and

Communication at the University of Illinois

at Chicago, was awarded the Julian L. Simon

Memorial Award. Prof. McCloskey argues in

her books The Bourgeois Virtues, Bourgeois

Dignity, and the forthcoming nal volume in

her trilogy that the economic growth of the past

200 years can largely be explained by attitudinal

shiftsethics that respect human freedom.Kristina Kendall, Executive Producer of

STOSSELand John Stossels documentary

hours for Fox News, served as the Master of

Ceremonies.

STOSSEL Executive ProducerKristina Kendall, who served asMaster of Ceremonies at the 2013CEI Annual Dinner

Left to right: Stamford University AssistantProfessor of Economics Art Carden, ReasonFoundation President David Nott, New York Timescontributor John Tierney, and Luke Tierney

Left to right: John Chisholm of John ChisholmVentures, Cato Institute President John Allison,and Cato Institute Vice President for DevelopmentLesley Albanese

CEI President Lawson Bader welcand addresses the audience at the2013 CEI Annual Dinner



9/12WWW.CEI.ORG


KEYNOTE SPEAKER

SENATOR RAND PAUL

Donald G. Smith (left) and Myron Ebell, Directorof CEIs Center for Energy and Environment

Rep. Justin Amash (R-Mich.) (left) andFoundation for Government AccountabilityDirector of Development Chad Goote

Patomak Global Partners CEO Paul Atkins (left)and TBP Solutions LLC President and CEI BoardMember Tom Haynes

ReasonEditor in Chief Matt Welch (left) and 98.7FM Music in the Morning host and Reason.tvcorrespondent Kennedy

Judd Weiss (left) and Walter Williams,John M. Olin Distinguished Professor ofEconomics at George Mason University


10/12


WWW.CEI.ORG


THE BAD

EPA Continues to EvadeDisclosure of Gina

McCarthys Text and

Training RecordsOn July 15, CEI led suit infederal court to force theEnvironmental ProtectionAgency to turn over phonebills for the EPA mobile deviceissued to Gina McCarthy, atop EPA ofcial and PresidentObamas nominee to serve asthe agencys next administrator.Obamas EPA is waving redags all over the place, said

CEI Senior Fellow ChristopherC. Horner. Ultimately, we willlearn if EPAs problems withnon-ofcial email accounts andaccounts not identifying theaccount holder extend to theiruse of private accounts fortexting or even destroying thisalternative to email, as it seems.Resolving the questions intodays suit and about her useof a personal account should benecessary conditions to moving

forward on her nomination. Thisalso would do much to addressthe growing impression GinaMcCarthy has something to hideand that EPA is going to greatlengths to help her hide it.

THE GOOD

SEC Permits Free Speechfor Hedge Funds,

Venture Capitalists

On July 10, the Securities andExchange Commission nallylifted its ban on advertisingand communications forhedge funds, private equitygroups, and the venturecapital community. Thisregulatory action occurred ayear and three months afterthe Jumpstart Our BusinessStartups (JOBS) Act wassigned into law, requiring

the rule change. CEI SeniorFellow John Berlau applaudedthe decision, noting, Liftingthese archaic rules will bea victory for entrepreneurs,all types of investors, and,most importantly, theFirst Amendment. Berlaucalled the repealed rulespaternalistic and anti-egalitarian, as they restrictednon-wealthy investors fromobtaining basic information

about how a number ofinvestment vehicles work.

THE UGLY

House Votes toPermanently ExtendTaxpayer Fleecing in

Farm BillOn July 11, the House ofRepresentatives approved the2013 Farm Bill on a mostlypartisan vote of 216-208.No Democrats voted forthe legislation, and only 12Republicans voted against it.Moreover, the legislation, H.R.2642, was rammed throughthe Republican-controlledHouse under a closed rule

allowing no amendments. Thelegislation greatly expandsthe crop insurance subsidyprogram, which heavilysubsidizes farmers premiumsand insurance companiesadministrative costswith nomeans tests. The bill also leavesin place the sugar program,which is a central planningscheme that allocates domesticsupply, restricts imports, andsets prices substantially higher

than the world price.


11/12WWW.CEI.ORG


MediaMENTIONSCompiled by Nicole Ciandella

Senior Fellow Gregory Conkowarns

against state initiatives to track

pharmaceuticals:Over the past several years,

pharmaceutical makers have been working

with distributors and pharmacies to develop

methods that make it easier to spot and

eliminate tainted and counterfeit products.

Together, they have developed technologies

ranging from tamper-proof packaging and

unique identication codes to authentication

tools such as holograms and color-shifting

printing, all of which help protect the

integrity of the medicines we buy.

Unfortunately, state legislators and

regulators have begun to implement amaze of inexible, expensive, and often

conicting traceability and pedigree

rules that threaten to short-circuit

these innovations and jeopardize the

effectiveness of industry-wide quality

control programs.

Currently, 11 states have enacted special

track and trace legislation, and 18 others

have adopted their own regulatory standards,

with little uniformity. And those state-by-

state compliance costs are astronomical.

California, for example, has adopted a rule

that will require all drugs to be serializedand electronically tracked by 2017. The

pharmaceutical industry is projected to

shell out up to $3.5 billion to meet new

requirements in the Golden State alone.

June 3, The Hill

Vice President Iain Murrayurges

Americans to learn from Europe on

wind power:

When Germany decided to close

down its nuclear power stations after

the Fukushima disaster in Japan, the

original plan was to replace most of the

lost generating capacity with wind power.

However, wind power is expensive, and

the growing size of the industry has meant

that subsidiesand energy billshave

surged. The German subsidy is paid for by

a surcharge on household electricity bills.

The growth in wind power meant that in

January the surcharge increased to over 5

cents (euro) per kilowatt hour, representing

14 percent of all electricity bills.

In Germany,

Chancellor Angela

Merkel, realizingthat wind power

is economically

unsustainable, has

proposed capping the

subsidy until the end

of 2014 and capping

further rises to 2.5 percent, with the

probability of further signicant reform

after the federal elections this year. Its

a similar story in Spain, where subsidies

have been cut so much that the chairman

of the countrys Association of Renewable

Energy Producers said recently: Spainsgovernment is trying to smash the

renewable energy sector through legislative

modications.

-June 13, USA Today

Senior Fellow Matt Pattersonand

Research Associate Julia Tavlasargue

the United Auto Workers union has had

a disastrous effect on Detroit and could

have the same effect on Chattanooga:

Not coincidently, the torturous decades

of Detroits decline coincided with the

entrenchment of UAW power. Indeed,for years the UAW pushed for contracts

giving generous benets to its members,

driving up automakers costs to the point of

unsustainability.

A union in a company acts very much

like a virus in a body; even if the virus

itself is not fatal, it can leave its host body

weakened and drained of the resources it

needs to survive. In the 1980s and 1990s,

when foreign-owned companies like

Toyota were entering the U.S. market in

large numbers, UAW contracts bound and

gagged the Big Three Detroit automakers

with costs and regulations that fatally

restricted their ability to innovate and

compete, just as they had done with

Packard against the Big Three in the

1950s. Now, having long ago devoured

Detroit and its car industry, the still

ravenous union is forced to look South for

its next meal.

City ofcials need no crystal ball to

see Chattanoogas future if the UAW gets

ahold of its VW operation. They need

look no further than the crumbling,

broken walls of Detroit, Michigan,

and the abandoned Packard plant that

serves as its burnt and hollow heart.

-June 23, The Chattanoog

Times Free Pres

Founder and Chairman Fred L.

Smith, Jr.defends the Scrooges

of society with a story about his

childhood in Louisiana:

My Daddy was the lockmaster

at Lock #1 on the Pearl River Corps of

Engineers system, which brought him into

contact with many of the locals. When

my mother died, women from throughout

the community brought us hot dishes and

provided solace.

The comfort of community had adownside, however. Adam Smiths

admonition that, It is not from the

benevolence of the butcher, the brewer, or

the baker that we expect our dinner, but

from their regard to their own interest

seems not to have gained many adherents

in Sixth Ward, whose egalitarian and

communitarian values made it hard for

entrepreneurs to ourish and contribute to

economic growth.

Every so often, a talented and

enterprising individual would launch a new

business, such as a sawmill, gravel pit, or

butcher shop. Sometimes these endeavors

would ourish, and the impoverished Sixt

Ward (where many still lacked electricity

and running water) would become a

little less poor. But in this closely knit

community, success placed cultural

demands on the entrepreneur. He would b

expected to make place in his business for

an out-of-luck Uncle Bill or Aunt Sally.

Often, that entrepreneur would give

in to such cultural pressures and add

these individuals to his payroll and theoperations efciency would decline,

often leading to its collapse. And with tha

collapse, the additional wealth that the

entrepreneur had created would disappear

leaving the Sixth Ward a bit poorer and a

little less prone to other entrepreneurial

ventures.

-July 17,Forbe


12/12


Million-Dollar Bus Stop Breaks

Arlington, Virginia, recently

caused a national stir when it built a $1

million bus stop. The prototype super

stop was intended to be a model for

future stops along Columbia Pike. The

road has been a target for multiple

redevelopment efforts, including a

possible modern streetcar, which the

super stops would serve. The super

stop has a heated concrete oor, but it

is only partially enclosed, so it doesntshelter riders from wind. Riders also

quickly found out that its rakishly

angled roof doesnt keep rain out.

And in mid-July, the video screen that displays bus arrival times

stopped working, as a heat wave proved too much for it. Ofcials

said it would take approximately two weeks for a new cooling fan

to arrive. Until it is repaired, the super stop stands as an expensive

monument to gold-plated government waste.

Federal Agency Demands Michigan Disaster Plan

Marty Hahne is a magician in Missouri. He has been putting on

magic shows for kids for almost 30 years as Marty the Magician.

Back in 2005, he got in trouble with federal bureaucrats. Turns outhe was using an unlicensed rabbit for his grand nale of pulling a

rabbit out of a hat. Hahne quickly found out that the Department of

Agricultures (USDA) regulations for magicians rabbits, in force

since 1966, are both strict and extensive. Eight years later, the

agency is still harassing him. Now, under new regulations, animal

exhibitors such as Hahne are required to le written disaster

plans to the Department of Agriculture covering at least 21 types

of disaster, from broken air conditioners to hurricanes. Hahnes

disaster plan for Casey is 28 pages long, and is considered short

for its genre. Luckily for Hahne, an attorney was kind enough to

draft it for him pro bono. The USDA is now revisiting the rule.

MSNBC Host: Small Government

Bankrupted Detroit

MSNBC host Melissa Harris-Perry

made waves following Detroits public

bankruptcy, claiming with a straight

face, This is what it looks like when

government is small enough to drown in

your bathtub, and it is not a pretty picture.

Contrary to Ms. Harris-Perrys narrative,

it is quite clear that Detroits corrupt and

irresponsible government bankrupted the

city. Of its $18 billion debt, $9.2 billionis from unfunded pension and health care

obligations for city retirees. Residential

property taxes are the highest in the nation

income taxes are the highest in Michigan, and the city imposes a

living wage of $11.03 and myriad business licensing regulation

that drive a full tenth of businesses into the black market. Even

with an imagination as creative as Ms. Harris-Perrys, it would be

hard to describe any of these measures as consistent with small

government.

USDA Spends $20 Million to Not Inspect Catfsh

A little known provision in the 2008 Farm Bill created a catsh

inspection ofce within the Department of Agriculture. Traditionallythe department had authority to inspect meat and poultry, while

seafood and other products were inspected by the Food and Drug

Administration. In addition, the Department of Commerce has its ow

inspection program. Since 2008, the USDA has spent $20 million

setting up the catsh inspection ofce and expects to spend $14

million annually. Yet it has yet to inspect a single catsh. Members

of Congress in both parties have called for the closure of the USDAs

duplicative service. But why was it created in the rst place? In turns

out many domestic catsh producers do not like foreign competition

But this proved too much for the industrys National Fisheries

Institute, which has criticized the program as a non-tariff trade barrie

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